Five Reasons Not to Take Out a Business loan

[Psalmsavatar]

Business loans are harder to get. Business loans are only convenient and accessible to people who do not need the money. ... Even with a good personal credit history, they will not give a loan for a new company, even if the company has a guaranteed contract to purchase a large order.

 

[Neeta313]

The most important reason not to take out a business loan is the fact that the business is a risk, what if you will not be able to pay back that money, you risk losing your collateral. It is advisable to get your loan from family members or Friends people that can be patient with you till you are able to pay back and you won't have to drop any collateral.

 

[Jumoke12]

Every business needs extra cash from time to time, and there are plenty of good reasons to take on debt: to launch new products, expand your business, or purchase needed inventory. But there are also plenty of bad reasons to take out a loan. Here are five.​

1. To launch a new business idea before you have thoroughly researched it. Fads come and go; the goal is the find one that sticks. Before you decide to buy into the latest fad concept, spend some time doing market research and deciding whether or not the concept is a good match with your experience and interests. Many people think that owning a restaurant is glamorous but find out later that it is very hard work. Do your homework before you take on a serious financial commitment. Should You Personally Guarantee a Loan to Your Business?
2. Your credit cards and lines of credit are maxed out. If you have exhausted all other available credit, maybe taking on more debt is a bad idea. When lenders see that you are overextended, you will likely be required to secure the loan with assets. If you are having difficulty paying your existing financial obligations, you are entering risky territory by gambling with your facilities, inventory, equipment, or even worse, your own house. Read more about Cleaning Up Your Company’s Bad Credit Profile.
3. To make an impulse buy you can’t afford. Perhaps there is a new technology or machinery you think would benefit your business, or maybe you want to remodel or upgrade your facilities. While all of these things may prove advantageous to your business, you won’t be able to reap the rewards if you have leveraged all of your assets and the extra profits you make go toward repaying the loan. If the idea doesn’t bring in extra revenue, you are still responsible for paying back the loan. If you used assets to secure the loan, you may end up without a business at all.
4. You saw an advertisement or received an email about unbeatable interest rates. As the old adage goes, if it sounds too good to be true, it probably is. And on the outside chance that it is true, just because you can get a great interest rate doesn’t mean you should.
5. You want to consolidate your debts but haven’t learned how to budget. Maybe your company is going through a tough time, or maybe you have mismanaged your company’s finances and are now looking to consolidate all of your debts. Debt consolidation may ease the pressure temporarily, but you need to address the underlying problem if you want your business to succeed.

You have said it all. I do not really like the idea of using a loan to finance a business because there's an unknown thing about business which is uncertainty

 

[Doradorwa]

You have said it all. I do not really like the idea of using a loan to finance a business because there's an unknown thing about business which is uncertainty

It's never advisable. It's better to gather capital no matter how slow it might be and start your business with your mind been at rest...loan is like a ghost it keeps chasing you until you pay up.

 

[Shigobad20201]

Every business needs extra cash from time to time, and there are plenty of good reasons to take on debt: to launch new products, expand your business, or purchase needed inventory. But there are also plenty of bad reasons to take out a loan. Here are five.​

1. To launch a new business idea before you have thoroughly researched it. Fads come and go; the goal is the find one that sticks. Before you decide to buy into the latest fad concept, spend some time doing market research and deciding whether or not the concept is a good match with your experience and interests. Many people think that owning a restaurant is glamorous but find out later that it is very hard work. Do your homework before you take on a serious financial commitment. Should You Personally Guarantee a Loan to Your Business?
2. Your credit cards and lines of credit are maxed out. If you have exhausted all other available credit, maybe taking on more debt is a bad idea. When lenders see that you are overextended, you will likely be required to secure the loan with assets. If you are having difficulty paying your existing financial obligations, you are entering risky territory by gambling with your facilities, inventory, equipment, or even worse, your own house. Read more about Cleaning Up Your Company’s Bad Credit Profile.
3. To make an impulse buy you can’t afford. Perhaps there is a new technology or machinery you think would benefit your business, or maybe you want to remodel or upgrade your facilities. While all of these things may prove advantageous to your business, you won’t be able to reap the rewards if you have leveraged all of your assets and the extra profits you make go toward repaying the loan. If the idea doesn’t bring in extra revenue, you are still responsible for paying back the loan. If you used assets to secure the loan, you may end up without a business at all.
4. You saw an advertisement or received an email about unbeatable interest rates. As the old adage goes, if it sounds too good to be true, it probably is. And on the outside chance that it is true, just because you can get a great interest rate doesn’t mean you should.
5. You want to consolidate your debts but haven’t learned how to budget. Maybe your company is going through a tough time, or maybe you have mismanaged your company’s finances and are now looking to consolidate all of your debts. Debt consolidation may ease the pressure temporarily, but you need to address the underlying problem if you want your business to succeed.

Before starting a business, you must first do research on it very well to know what you are getting into, try and raise enough cash before venturing into the business proper because if you go into borrowing money to start a business , it might affect the business on the long run and cripple the business.

 

[Josemendez]

These are great tips you have just pointed out now and I believe they are all rationale. One who do not need urgently particular machinery in his or her farm do not really need to borrow for it . He can save up

 

[Adventurer]

You have made very good points and I agree with every one of them. I do not believe in taking loan for start ups and using loans to pay off debts. Loans can sink a business, so, it is better to avoid them as much as possible.

So true, my former employer took a bank loan to support her bakery business, she even used har home as collateral, it wasn't a good experience as she began to default soon enough the banks were swarming all over her, it was a very tryin period for her.

 

[Arman036]

Obtaining a loan to start an unproven business is indeed a bad idea. Obtaining a loan to start a franchise location usually is a good idea. ... A business loan will often have worse terms and require lots of paperwork. Functionally, a business credit card is a form of a loan.

 

[Senator]

You have just payed everything just bare. It is a simple fact that taking out loan for a business without having a back up plan is a sucide

 

[Niftyyem]

So true, my former employer took a bank loan to support her bakery business, she even used har home as collateral, it wasn't a good experience as she began to default soon enough the banks were swarming all over her, it was a very tryin period for her.

That was a suicidal decision she took for her business and it is a pity she never got the right counsel before taking up such loan. My believe is that it is better to start small and allow the business grow itself. If I must take loan, it would be an interest free loan from kin.

 

[Setho]

In as much as I am more of a hundred dollar kind of business person, I do not advocate That you borrow any money or take high interest loans to start a business. In a business, you should Always try to save and plan ahead, go into a partnership or ask for family and friends grants. If you must take a loan, then it shouldn't be a harsh one.

 

[nimzy]

A numbers of the reason which includes 1. is not advisable to take out loans on things that are not profitable to the company or business, 2. taking out loan to finance family issues, 3. taking loan to purchase vehicles that are not of profit to the company and many other reason to avoid in order to secure your business.